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Adamas Pharmaceuticals (NASDAQ:ADMS)
Q4 2017 Earnings Conference Call
Feb. 22, 2018 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Adamas Pharmaceutical Fourth-Quarter and Full-Year 2017 Financial Results and Corporate-Update Conference Call. At this time, all participants are in a listen-only mode. At the end of the company's prepared remarks, we'll open the call for questions and will provide specific instructions. As a reminder, this call's being recorded.

I'd now like the turn the call over to your host, Ashleigh Barreto, director of investor relations and corporate communications at Adamas. Please go ahead.

Thank you, operator, and good afternoon, everyone. Joining me on the call today are Dr. Greg Went, our founder, chairman, and chief executive officer; Alf Merriweather, our chief financial officer; Richard King, our chief operating officer; and Dr. Rajiv Patni, our chief medical officer.

Before we begin, I'd like to remind everyone that this call will contain forward-looking statements, which are subject to risks and uncertainties. Any statements regarding future events, results, or expectations are forward-looking statements. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We undertake no obligation to revise or update these forward-looking statements in light of new information or future events.

Information concerning factors that could cause actual results to differ materially from those contained in or implied by such forward-looking statements are discussed in greater detail in our Form 10-K filed with the SEC today. I'll now turn the call over to Greg.

Gregory Went -- Chief Executive Officer and Chairman

Thank you, Ashleigh, and good afternoon everyone, and thank you for joining us today. Let me begin by saying, I'm incredibly proud of the accomplishments made by the Adamas team in 2017, especially the approval and commercialization of GOCOVRI, the first and only FDA-approved medicine for the treatment of dyskinesia in patients with Parkinson's disease receiving levodopa-based therapy. This medicine represents the most important proof point to date of our time-dependent biology approach. Parkinson's disease is the second largest neurodegenerative disorder and is particularly burdensome and costly, not only to patients and care partners, but also to the healthcare system.

This is why it was so important for us to bring to market a medicine that delivers substantial benefits to patients. Through our understanding of the temporal patterns of the mechanisms underlying Parkinson's disease, the disease systems and the biological response of amantadine, we discovered and developed GOCOVRI. Use of GOCOVRI is supported by a robust NCE-like level development program required by the FDA, which included nonclinical studies, three controlled clinical studies, and a soon-to-be-completed, two-year open-label safety study. GOCOVRI is clinically proven to deliver significant and durable effects in both dyskinesia as well as "off" time to provide Parkinson's patients with a four-hour daily improvement in functional time or "on" time without troublesome dyskinesia.

We are proud that we are now providing help to these patients in need. Before I hand the call over to Alf to review the results of the quarter, I would like to address the recent approval of OSMOLEX ER. We are continuing to evaluate the approval, which was a surprise to us and others in the Parkinson's disease community. First, its regulatory approval was based on data from bioavailability studies in healthy volunteers with no new clinical data.

Based on this and the fact that OSMOLEX ER label inherited most of its information from the amantadine immediate-release label, we assume there must be some degree of bioequivalence between it and generic immediate-release amantadine. Second, it appears, given the lack of any new clinical efficacy or safety data, to simply be a longer-lasting version of amantadine immediate-release that has the same indications for use in Parkinson's disease or drug-induced extrapyramidal systems as immediate-release amantadine. Importantly, it is not approved for the use of dyskinesia in Parkinson's disease, as this is a separate and distinct orphan-movement disorder. As you recall, the challenge of amantadine immediate release in dyskinesia Parkinson's, amantadine being a long half-life drug, is not one of inconvenient dosing, but a lack of durable benefit due to poor efficacy and intolerability at higher doses.

We believe that the lack of efficacy is due to the inability to get to the required plasma levels of amantadine in the morning and during the day, and the tolerability issues are due to having higher levels in the afternoon and evening. As we have presented at the ISPOR conference last year, this results in a very low number of Parkinson's patients remaining on amantadine immediate release over time. GOCOVRI addresses that challenge. Our view of the opportunity for GOCOVRI has not changed.

We recognize that there could be confusion, and we will be vigilant to address it with the payers, physicians, and patients. However, we will -- that's what we know today, and we will continue to update you as we learn more. With that, I'd like to turn the call over to Alf.

Alfred Merriweather -- Chief Financial Officer

Thanks, Greg. I'm pleased to report that in the fourth quarter of 2017, we recorded our first revenue from the sale of GOCOVRI. This amounted to $568,000 in net product revenue, which is recorded on the sell-in method with revenue recognized upon delivery to our specialty pharmacy. GOCOVRI was placed in our distribution channel in October without promotion, which should not begin through our 59-person strong sales force till January 2018.

I'll briefly cover some additional aspects of our financials and then return to our reporting framework for revenue. Net loss for the quarter was $29.4 million, compared to a net loss of $15 million for the same period in 2016. For the full year, we reported a net loss of $89.5 million compared to $60.1 million in 2016. Research and development expenses were $6.4 million during the fourth quarter of 2017 and $27.2 million for the year.

R&D for the year reflects ongoing costs for the GOCOVRI open-label study, pre-approval manufacturing costs for GOCOVRI, as well as costs related to our programs in MS walking and epilepsy. Expense in 2017 was reduced from 2016 level of $31.2 million. In 2018, we will complete the GOCOVRI open-label study with a data readout in the second quarter, initiate the MS walking Phase III study, and prepare for the initiation of the ADS-4101 Phase III study. Accordingly, R&D expense in 2018 will increase, and we are providing guidance of $45 million to $50 million for the year.

With respect to selling, general, and administrative, or SG&A, expenses, these were $23 million for the fourth quarter of 2017 and $61.3 million for the full year. The fourth-quarter spend includes the costs of the sales force for just one month, based on the hiring at the end of November. Also included are costs of building commercial infrastructure for launch and marketing programs in preparation for launch, which occurred in January 2018. For 2018, SG&A expense will increase significantly with the full commercialization of GOCOVRI.

After 2018, we are providing guidance for SG&A expenses of $115 million to $125 million. Our cash and investments as of December 31, 2017, was $176.4 million. In January 2018, we completed a follow-on offering through the issuance of 3.45 million shares at $41.50 per share, with net proceeds of $134.1 million. With these funds, we are well-capitalized to execute on programs that we will describe on today's call.

Before passing to Richard, let me remind you of the financial framework that we laid out at our Investor Day in September. We call this a framework, as we are providing parameters to aid investors in thinking through potential commercial adoption in 2018 but are not providing specific revenue guidance. Recall that we have suggested that a reasonable framework for looking at launches in this space is a 1% penetration of the relevant target patient population as an average for the first year after launch. Further recall that our target patient population is 150,000 to 200,000 Parkinson's disease patients with dyskinesia.

Also, as part of the framework, we suggested that for gross to net, or GTN, 25% to 35% was an appropriate initial range. There are many factors that will contribute to this on a quarter-to-quarter basis, including payer mix, co-pay relief, possible contracting with payers, and the impact of the doughnut hole for Part D patients. We are early in our launch, and it's simply too early to comment on where this will settle. But we believe this is still an appropriate range for investors to consider.

Within the overall revenue framework that I have just described, we are very pleased with our progress to date, including the reaction of both payers and physicians to GOCOVRI. We also laid out our reporting framework for 2018, commencing with our first-quarter call, which will be in early May. Starting with Q1, in addition to GAAP financial information, we will report the number of prescribers and the number of prescriptions filled during the quarter. In January, we reported that through December 31, 2017, 100 prescribers had written prescriptions for GOCOVRI.

As of February 16, this number has increased to over 300, reflecting strong initial adoption among the 6,500 targeted physicians and good growth in just six weeks of the deployment of our sales force. I will now pass to Richard to discuss the GOCOVRI commercial activities.

Richard King -- Chief Operating Officer

Thank you, Alf. With the approval and launch of GOCOVRI, people with Parkinson's disease now have an FDA-approved medicine, clinically proven specifically to treat their dyskinesia. In clinical trials, GOCOVRI not only significantly reduced dyskinesia by approximately 30% compared to placebo, it also reduced "off" time by approximately 40% and increased functional time by about four hours a day, as measured in patient diaries, as "on" time without troublesome dyskinesia. This means that for the first time, physicians treating people with Parkinson's disease don't have to choose between managing dyskinesia and treating "off" symptoms.

Importantly, we believe it will allow them to fully -- to more fully utilize levodopa, the gold-standard treatment for Parkinson's disease, to control their underlying Parkinson's disease symptoms, as evidenced from our development program. We've seen strong interest from physicians in GOCOVRI, so let me now turn to the progress that we have made as we launch the product. As you recall -- as you will recall, we had recruited our 59 neurology account specialists, attracting a highly qualified team, averaging 17 years of pharma industry experience, nine years of neurology experience, and with more than 75% of the appointed neurology account specialists having specific movement-disorder experience. We completed training of the sales team at a launch meeting in January, at the center of which we focused on the daily challenges that dyskinesia can pose for people with Parkinson's disease.

We were fortunate to have two of the participants in our clinical trials attend the launch meeting and it's extremely moving and poignant to hear from their direct experience how treatment with GOCOVRI had impacted their daily lives. Their prior daily experiences were similar, as each would alternate between "off" and dyskinetic episodes four or five times a day, in conjunction with the frequency of use of levodopa. But each reported how treatment with GOCOVRI effectively treated their dyskinesia, enabling each to return to managing their activities of daily living more effectively. I'm pleased to report that both these patients are now happily again on GOCOVRI.

The sales team deployed into the field January 8, and since that time, we have seen strong growth in both prescribers of GOCOVRI and new prescriptions received for GOCOVRI. As Alf noted, as of February 16, we have over 300 GOCOVRI prescribers, up from 100 prescribers at December 31, 2017. This reflects the activity of the sales organization, as it engages physicians for the first time to make them aware of the GOCOVRI data. And to remind you, it typically takes several visits to a prescriber, before they begin to prescribe, so the strong growth in prescribers is very encouraging in such a short period.

In addition, in early February, we deployed our clinical speaker program to provide peer-to-peer education and discussion of the clinical profile and experience with GOCOVRI. Also in late January, we introduced a digital marketing campaign directed at elevating Parkinson's patients' awareness to dyskinesias, since we believe, in many cases, that patients are not aware of the distinction of dyskinesia from other symptoms of Parkinson's disease, and the underlying causes and potential treatment options now available for their dyskinesia. As you know, our discussions with payers regarding GOCOVRI are in full swing. Clinical presentations have been well-received, and these payers are moving forward in their process to determine guidelines for reimbursement.

It is important to note that even in situations in which payers have not published reimbursement criteria, we are routinely seeing patients receive reimbursement for GOCOVRI. We continue to engage payers to streamline the processing of claims for GOCOVRI. GOCOVRI Onboard is working well to process received prescriptions, with the majority of patients in both commercial and Medicare coverage gaining access to GOCOVRI. We are not providing drug samples, and we do not have a free trial program through our specialty pharmacy.

We do have a QuickStart Program, whereby qualified patients can receive a free 14-day supply if the benefits verification process is taking more than five days. To date, a majority of patients have not utilized this program. To close. Although it's very early, we are pleased with the access we are seeing for patients and the progress of our launch.

We look forward to reporting our first quarter of sales in May. With that, I'll pass the call over to Rajiv.

Rajiv Patni -- Chief Medical Officer

Thanks, Richard, and good afternoon. We continue to demonstrate our commitment to discovery, development, and advancing the education of the medical community with our recently published manuscripts and upcoming presentations at medical conferences. These publications and presentations reinforce how we at Adamas, in collaboration with our clinical and preclinical expert advisors, are expanding awareness of how time-dependent biology applies to neuroscience. Let's start with the recent publication in Movement Disorders-Clinical Practice.

In this publication, we report the efficacy and safety data in a subgroup of patients taking amantadine immediate release and switched to open-label GOCOVRI. It is important to recall the average dose of amantadine immediate release for this subgroup of patients was 274 milligrams of amantadine hydrochloride immediate release, which is higher than the typical dose of 100 milligrams twice daily of amantadine hydrochloride used in clinical practice. In this amantadine IR subgroup, there was a 35% reduction in motor complications after switching to GOCOVRI, which was comparable to the effects seen in patients previously treated with blinded placebo. We are very excited about this publication, because it provides that neurology community with open-label clinical-efficacy data that differentiates GOCOVRI from even higher-than-average doses of amantadine immediate release.

In addition, we published our placebo-controlled, proof-of-concept study with ADS-5102 in multiple sclerosis patients with walking impairment in the Multiple Sclerosis Journal. This four-week, 60-patient study demonstrated an effect on several walking measures, including a statistically significant 17% improvement in walking speed from baseline, and a greater proportion of ADS-5102-treated patients experienced at least a 20% improvement in walking speed from baseline. We are pleased with this timely publication as we progress toward enrollment into the Phase III study of ADS-5102 in MS patients with walking impairment. On the American Academy of Neurology meeting, I am happy to announce that all of our six abstract submissions have been accepted.

In these posters, we will present new efficacy and safety data on GOCOVRI and new data on ADS-4101. Stay tuned. Let me now turn to our progress with the Phase III trial in multiple sclerosis. We remain on track to enroll the first patient by early second quarter.

As a reminder, 570 subjects will be enrolled and randomized evenly to either placebo, ADS-5102 137 milligrams, or ADS-5102 274 milligrams for 12 weeks of double-blind-study drug treatment. The objective of this pivotal study is to confirm the findings of the Phase II study. In consultation with the FDA, the primary outcome measure is the proportion of patients that experience at least a 20% increase in walking speed. Based on the results of this first trial, we may decide to meet with FDA before initiating a second Phase III trial.

We look forward to bringing this new indication to market by 2022. With the additional capital we raised last month, we are now funded to advance our new product discovery programs. Our discovery programs will continue to focus on neurologic -- neurological and psychiatric diseases characterized by time dependencies. We will map the mechanism and the current of disabling symptomatology then create a unique and proprietary concentration-time profile designed to unlock the potential of these medicines.

We will then pursue, once again, NCE-like drug development to develop large treatment effects with manageable tolerability. We plan to contact four to five discovery projects per year and advance one compound per year into clinical development. With that, I will hand the call back over to Greg.

Gregory Went -- Chief Executive Officer and Chairman

Thanks, Rajiv. At Adamas, it is our mission to improve the lives of patients and their care partners suffering from neurological diseases. We pride ourselves in our discovering of time dependencies that enable us to develop medicines that yield large, meaningful clinical benefits, because we think that is what's in the best interest of patients. Through GOCOVRI, we are delivering on the promise of medicines that are changing people's lives based upon our time-dependent biology approach.

As Alf and Richard both noted, we are very pleased with how the GOCOVRI launch is gaining momentum. We look forward to updating you on other clinical-development events during the quarter, seeing many of you at AAN in April, and reporting on our first full quarter of GOCOVRI's launch on our Q1 call in early May. With that, I would like to open up the call for questions. Operator?

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please press the * and the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue you may press the # key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated.

And our first question comes from the line of Josh Schimmer from Evercore ISI. Your line is now open.

Joshua Schimmer -- Evercore ISI -- Managing Director

Good. Thanks for taking the questions. One series just on the GOCOVRI launch, whether you're able to give us an estimate for the number of prescriptions written, as well, other metrics, such as average turnaround time from when the prescription's written to when it's filled, and fill rates or rejection rate at this point.

Gregory Went -- Chief Executive Officer and Chairman

Josh, thanks for the call. I'm going to allow Richard to handle that one.

Richard King -- Chief Operating Officer

So at this stage, what we are prepared to talk about is, obviously, the number of prescribers. We'll -- we're still very early in our launch phase, I think, relative to all the information that you're seeking there, Josh. And as we come to our May call, we'll update some of those parameters accordingly.

Joshua Schimmer -- Evercore ISI -- Managing Director

OK. And then as you think about label-expansion opportunities for GOCOVRI, does the availability of the OSMOLEX ER product change your path forward? It sounds like Osmotica's positioning more around, perhaps, tardive dyskinesia. Does that change your approach to specifically going after that indication?

Gregory Went -- Chief Executive Officer and Chairman

Josh, I'll take that. It's Greg. I don't think so. It's still early days in evaluating that.

But recall from my comments, the label that OSMOLEX has is very much based upon that of immediate-release amantadine. And I think all of our attempts to look at indications for GOCOVRI are in light of the available -- the widespread availability of immediate-release amantadine as potential treatment. The data for which that label is based is from the '60s and early '70s. And so I really don't see it affecting it in this instance.

But it's still too early to declare what those indications will be and what effect it would have. But it will definitely -- we'll put it into the mix of the competitive landscape with the other products that are for treating tardive.

Joshua Schimmer -- Evercore ISI -- Managing Director

And then last question, in terms of the declaratory judgment timelines for the case, what can we expect, and should we also expect other patent-infringement litigation to be initiated?

Gregory Went -- Chief Executive Officer and Chairman

With respect to the declaratory judgment, that's -- case is in its early days. We've been served, and we don't comment on active litigation. So there really won't much of an update. But it's a standard process.

And to be clear, this is a case where, not challenging the patents for GOCOVRI, or GOCOVRI itself, it is one to get a decision rendered with regards to infringement of Adamas' patents out of a separate product. So no expectation of any other ones at this point in time, certainly can't rule it out. But we will always evaluate carefully any -- in the marketplace, where our -- infringes our patents and defend our patent estate.

Joshua Schimmer -- Evercore ISI -- Managing Director

Thanks very much. Congrats on a great start.

Gregory Went -- Chief Executive Officer and Chairman

Thanks, Josh

Operator

Thank you. And our next question comes from the line of Ken Cacciatore from Cowen and Company. Your line is now open.

Ken Cacciatore -- Cowen and Company -- Managing Director

Hi. Just wanted drill down a little bit deeper. It was really fast in terms of some of the details on managed care. So can you give us a sense, again, on some of these plans, whether there's been prior authorizations or not, and how you're dealing with that? And maybe, again, drilling down on some of the discussions on where the coverage actually stands in terms of covered lives, if you can give us any sense.

And then on the spending, probably my mismodeling, but spending seems a lot higher. And if I think about the 60 reps and then add in, kind of, the divisional managers and even given 300,000 per, it's about $20 million to $25 million. Can you help drill down on where all the spending is going? Are you going to be buying down some of these prescriptions, or maybe a little bit of nuance there as well? Thank you.

Richard King -- Chief Operating Officer

Let me deal first with the managed care side of things, for you, Ken. The -- I think people do traditionally think very much of coverage or not coverage. And that's a black-and-white situation. What I think is really important to realize is that black-and-white situation, we're not experiencing that black-and-white situation.

We do have formal coverage. I'm going to define formal coverage for you here as a situation in which plans have made a decision, a public decision, as to how they will handle GOCOVRI and manage approval of GOCOVRI prescriptions, when presented. That's -- we'll call that coverage for the sake of argument. And there are a good number of plans that have actually made that decision and presented those conclusions publicly.

And they're then handling GOCOVRI prescriptions according to that pathway. But we are seeing, across all of the payers that we've addressed and dealt with, responsiveness, regardless of whether they have published set of criteria or not to manage GOCOVRI. And, yes, in some cases, that results in a prior-authorization request, which then leads to, ultimately, prescription fulfillment. But we're seeing prescription fulfillment across most every plan.

There's very few that are not fulfilling. We have a handful of final decisions where people are not fulfilling prescriptions. But in general, people are all fulfilling, whether they have a published plan or not.

Ken Cacciatore -- Cowen and Company -- Managing Director

And then follow-up with regards to the plans?

Alfred Merriweather -- Chief Financial Officer

Yes, Ken, with regard to the spend. I mean, you're right in how you frame the sales force cost. There's also a reasonably significant marketing set of programs and dollars, people and program dollars behind that, which is fairly significant. And of course, SG&A also includes our administration functions, finance, legal, etc.

Would include our patent costs and the like. So there's a fair number of things in addition -- and just the sales force are included in that.

Ken Cacciatore -- Cowen and Company -- Managing Director

Thank you.

Operator

Thank you. And our next question comes from the line of Jason Butler from JMP Securities. Your line is now open.

Roy Buchanan -- JMP Securities -- Analyst

Hi, it's Roy in for Jason. Thanks for taking the questions. I had a couple questions about the MS walking Phase III. Are you using a couple of doses that are lower than what you used in Phase II? Can you describe what drove the decision to use a lower dose?

Rajiv Patni -- Chief Medical Officer

So we're testing the same dosing as in Phase II, which is the 274-milligram dose, which is also the 340 milligrams when you express it as a salt. So that's the same dose. And in consultation with the FDA, they encouraged us to also explore a lower dose, which is the 137-milligram dose of amantadine or a 170- milligrams when expressed as the amantadine salt. So that is why we're testing the dose we tested in Phase II as well as testing the lower dose, all based on FDA feedback.

Roy Buchanan -- JMP Securities -- Analyst

OK, got it. Thank you. And can you also tell us any assumptions around powering, assumptions around the placebo response variability that you expect for the Phase III? Do you expect the placebo response to plateau at four weeks as it possibly did in the Phase II?

Rajiv Patni -- Chief Medical Officer

So what I will say is that the power for the Phase III trial is what it needs to be for Phase III, No. 1. Number 2, it's based on what we observed in Phase II. No.

3, it's based on our understanding of the Phase III program done with dalfampridine. And most importantly, it's been confirmed with our FDA interaction.

Roy Buchanan -- JMP Securities -- Analyst

Great. Thank you.

Operator

Thank you. And our next question comes from the line of Tim Lugo from William Blair. Your line is now open.

Tim Lugo -- William Blair and Company -- Analyst

Thanks for the question. For the majority of patients who do not need a QuickStart product, is that because the reimbursement has gone relatively smooth for them? And can you give us some kind of defining features of these patients?

Richard King -- Chief Operating Officer

It is because it's going relatively smoothly, and we're getting to a point where we get reimbursement before we need to move toward a QuickStart. I'm not sure I can give you any more characteristic than that, other than, there's no -- I can't tell you they're all commercial or they're all Medicare. We're seeing it across all different characteristics of the payer environment, and there's no particular patient environment that I can point you to either at this stage.

Tim Lugo -- William Blair and Company -- Analyst

OK. And then maybe for the patients who did need a QuickStart Program, how many of those have needed two QuickStarts? And then what's the -- what's kind of the ultimate capture rate you believe you'll get for those patients?

Richard King -- Chief Operating Officer

So very few have needed two QuickStarts. The capture rate, I -- it would be too early for me to speculate at this stage.

Tim Lugo -- William Blair and Company -- Analyst

All right. And maybe one last question on the pipeline. For 4101, what line of therapy are you developing that in, again? And how many doses and will there be comparator arm in any of your clinical trials?

Rajiv Patni -- Chief Medical Officer

So we've talked about this before, and -- so we just remind you that as we've reported, we're going to have an FDA meeting where we will review all this. Our thinking is to test versus placebo, a high dose of 4101, 600 milligrams as well as 400 milligrams. And in addition and most importantly, we will also have an arm of VIMPAT 200 milligrams twice a day. So our approach to the development of ADS-4101 is to really have two superiority trials or two superiority analyses.

One of 4101 versus placebo and the other versus VIMPAT.

Tim Lugo -- William Blair and Company -- Analyst

All right. Thanks for that.

Operator

Thank you. And our next question comes from the line Serge Belanger from Needham and Company. Your line is now open.

Serge Belanger -- Needham and Company -- Analyst

Hi, good evening. First, a question on OSMOLEX. Greg, you mentioned you were taken by surprise with the approval of the product. Was it -- I guess, was it the path to approval or the actual label that caught you by surprise?

Gregory Went -- Chief Executive Officer and Chairman

Well, as you know, Serge, we'd been following and tracking while they were developing the product for, levodopa-induced dyskinesia. So really, the surprise comes from the pathway. And the appearance of the approved product, absent any clinical trials going on to support its indication -- and to support indication of the drug in light of the use pattern of amantadine IR and its label, which is pretty absent any clinical data, or modern clinical data, to support its use in Parkinson's and drug-induced extrapyramidal symptoms. So those were the things, I think, that caught us off-guard and the community.

Serge Belanger -- Needham and Company -- Analyst

OK. And then I know, it's still early, but the -- do you think your GOCOVRI promotional campaign right now is well-designed to address any OSMOLEX threat at this point?

Gregory Went -- Chief Executive Officer and Chairman

Let me start the answer and see if Richard wants to chime in. From the start of Adamas, back in 2004, there was immediate-release amantadine available with a use pattern that, frankly, hasn't changed much in the last 15 to 20 years. And so we understood the biology of the disease, the biology of the drug, how those two things interact, how those two timing patterns interact, to figure out that you needed to give amantadine at night, allow it to rise slowly during the night to be high, prior to taking the first dose of levodopa in the morning. How high? We've begun -- we began to establish that back in the mid-2000s, and Rajiv's team began to publish papers on the, really, the requirements to hit a target in the range of 1,500 nanograms per ml before the patient wakes up in order to have any benefit, when levodopa comes on board.

And then to have it significantly lower than that and descending when the patient is heading into their evening hours and going to sleep. The situation at this point, looking at the label, has not changed, because we've been preparing to promote GOCOVRI with that profile into a marketplace which is accustomed to immediate-release amantadine, which is given in the morning, given twice a day, 90% of the time, with a plasma level that accumulates and gives rise to a certain therapeutic profile, which is not particularly durable and as reflected by the use pattern we see. We just don't see a very wide use of it. So at the moment, I don't see a significant adjustment other than being prepared for the confusion that another amantadine immediate-release-like product could pose to the market.

Richard, any --

Richard King -- Chief Operating Officer

I'll only add that the use of GOCOVRI in Parkinson's dyskinesia is very clearly supported by a very robust safety and efficacy data package, which clearly demonstrates the package on both dyskinesia and "off" in that patient population. And for about the last four or five months right now, we've been presenting to the payer community and the physician community the value proposition that's derived from that dataset. And that's in the environment in which amantadine IR is available. And that's been resulting in very strong resident support for GOCOVRI at both the physician and the payer level.

So if you believe that OSMOLEX ER is basically an equivalency to IR amantadine, then I don't think that value proposition to either the payer or to the physician committee changes in that light.

Serge Belanger -- Needham and Company -- Analyst

Just a couple of questions on 4101. Has your meeting with the FDA been scheduled at this point?

Gregory Went -- Chief Executive Officer and Chairman

We don't typically comment on the scheduling of meetings, but we will report back when we have minutes.

Serge Belanger -- Needham and Company -- Analyst

OK. And the initiation of the Phase III program here, it's still scheduled for early '19?

Gregory Went -- Chief Executive Officer and Chairman

Pending outcome of that FDA meeting. Yes, Serge.

Serge Belanger -- Needham and Company -- Analyst

Got it. Thank you.

Operator

Thank you. And our next question comes from the line of Carl Byrnes from Northland Securities. Your line is now open.

Carl Byrnes -- Northland Securities -- Analyst

Thanks. Just a couple real quick questions. How is it possible for OSMOLEX to be marketed for LID, given the morning administration, which is clear in the PI and obviously given the work that you've done with the respect to time-dependent release and your PI of administrating GOCOVRI in the evening. Where I'm going with this, specifically, is how can Medicare reimburse off-label and the company not be at risk for substantial fines for marketing an off-label indication? So that's the first item.

And then the second item, just given the nature of the declaratory judgment, which really isn't enforceable, what might be the next steps be in just -- if we work with the assumption that it didn't come back favorable to you? What would be the next course of action? I mean, in general, these things aren't enforceable. They're sort of pre-emptive strikes, if you will.

Gregory Went -- Chief Executive Officer and Chairman

You had three questions embedded in your two questions. So I'll try to give quick answers and throw it over to Richard for substances. [Inaudible]. So first of all, on your first question, it's not indicated -- OSMOLEX is not indicated for treatment of dyskinesia.

It carries with it now the indications that amantadine immediate release had, which are not and do not overlap with levodopa -- dyskinesia in Parkinson's patients. So that's No. 1. No.

2, with regard to the declaratory judgment, as you've read and as you know, this is, really, them seeking decision from a court that they don't infringe our patents. And these are patents that are separate and distinct in many cases from patents that protect GOCOVRI. So we're evaluating the complaint and our course of action and will proceed on that basis. With respect to how the Medicare is going to respond, Richard, do you want to just comment on that at this point?

Richard King -- Chief Operating Officer

It's a great question. Obviously, we will be approaching Medicare in the late spring of this year regarding GOCOVRI, regarding the unique indications that GOCOVRI has. And Medicare, traditionally, manages products with unique indications in a very specific way. So we will work that through with CMS and Medicare in general.

And then we'll get through at the plan level following that point.

Gregory Went -- Chief Executive Officer and Chairman

If I could just make one more point, because I think you raised it very nicely. What these two products have in common is an active ingredient. Everything past that is actually very different. Full-efficacy package, very NCE-like level label that was written primarily by Adamas, based upon our data.

The OSMOLEX label is inheriting a majority from a -- labels from the '60s and '70s attributed to amantadine IR. And we do expect, and we hope, that all participants in the healthcare system are going to understand through our efforts and respect those distinctions and what those labels permit them to do.

Carl Byrnes -- Northland Securities -- Analyst

Great. Thanks so much.

Operator

Thank you. And our next question comes from the line of Josh Schimmer from Evercore ISI. Your line is now open.

Joshua Schimmer -- Evercore ISI -- Managing Director

Hey, thanks for taking the follow-up. Getting a bunch of questions in terms of the revenue that was recognized in the fourth quarter, and how we interpret the sell-in revenue recognition model. What -- can you just outline what the criteria are to recognize revenue? And at least, how we might think about the gross-to-net discount in the fourth quarter relative to what we might see in subsequent quarters?

Alfred Merriweather -- Chief Financial Officer

The sell-in method, which is what we're using in Q4 -- and, as you may know, Josh, the rules are changing -- everyone is required to use sell-in in 2018. There's no flexibility. In the past, there was some flexibility. You had to prove you were able to use sell-in, which with our tradition we've been able to do.

So the sell-in method means that we take revenue when we -- when a product is delivered to Walgreens, who maintains some inventory but primary inventory is really held by ourselves. So there is a difference, which as we go forward, won't be particularly significant, but it will be another small incremental piece of revenue to the extent that there's inventory being built at Walgreens. So there will always be an element of revenue that comprises that. But we won't be getting into the details of how much that difference is.

And regarding gross-to-net -- I'm sorry -- with regard to gross-to-net, I mean, there will certainly be variability quarter-to-quarter primarily on a quarterly basis. The doughnut hole for Part D, as you know, sort of is not entirely, but it's more a Q1 issue than later in the year, as people work through that. So there will certainly be variability quarter to quarter. And we haven't -- we consciously left our suggestion of 25% to 35% fairly general.

You would expect perhaps a higher level first quarter, for lower level at the end of the year with transitions in between.

Joshua Schimmer -- Evercore ISI -- Managing Director

OK. So there are no other unique, kind of, launch-related rebates or discounts that we had to factor into that?

Alfred Merriweather -- Chief Financial Officer

No.

Joshua Schimmer -- Evercore ISI -- Managing Director

And then the product is delivered to Walgreens on a patient-by-patient basis, that's --

Alfred Merriweather -- Chief Financial Officer

No, they maintain some inventory. And that's based on their expectation, based on the level of prescriptions they see coming through. They order fairly frequently. And it's not like a monthly or quarterly order.

I mean, they order as needed on a fairly short-term basis.

Joshua Schimmer -- Evercore ISI -- Managing Director

OK. So then I guess, as we adjust for inventory, I think, some investors are wondering whether there were a number of prescriptions that were written in the fourth quarter, but for whatever reason, product was not shipped and wondering about that turnaround time for a prescription to actually ship -- shipment?

Alfred Merriweather -- Chief Financial Officer

Well, there will certainly be some delays, Josh. But I don't think the timing of the shipments to Walgreen is a little bit of independent of the prescriptions coming through. So they're filling up their inventory as they see, as needed.

Joshua Schimmer -- Evercore ISI -- Managing Director

Any way to estimate the amount of inventory in that?

Alfred Merriweather -- Chief Financial Officer

You should think of it as being measured in weeks, not months.

Joshua Schimmer -- Evercore ISI -- Managing Director

OK. Thanks so much for the follow-ups.

Operator

Thank you. And our next question comes from the line of Caroline Palomeque from Noble Life Science. I'm sorry, your line is now open.

Caroline Palomeque -- Noble Capital Markets -- Analyst

Hi, thanks for taking the questions. I was just wondering if there were any other updates on formulary adoption. And I think -- I know, you had originally said that GOCOVRI will go on formulary in mid-2018. And I just wondered if you could just elaborate on that a little bit -- if there's any other updates since.

Richard King -- Chief Operating Officer

So we continue to see progress in terms of formal formulary coverage, as I referenced earlier on. I think, I'd just distinguish coverage being a published vehicle for the way in which a payer will -- has announced it will handle a GOCOVRI prescription. And we have an increasing, almost daily number of those, but I want to be sure that you realize that outside of that, where there is not actually a published formulary process for handling GOCOVRI, we're still seeing prescriptions filled. And we're seeing prescriptions filled at roughly the same pace and time frame as we're seeing in plans that have formalized procedure for GOCOVRI as well.

So I want to make sure that that distinction, while it's important, is not the critical defining distinction for access to GOCOVRI.

Caroline Palomeque -- Noble Capital Markets -- Analyst

OK, that's helpful. And then just a quick follow up question on the declaratory judgment for OSMOLEX. Now, can you just tell us a little bit more about like the back story as to where all this began? I believe there was a letter back in 2015? And if you could just tell us a little bit more about that? And then I think that would really help me, sort of, frame the whole situation there.

Gregory Went -- Chief Executive Officer and Chairman

Sure. I mean, again, what's found in the complaint is a letter that we sent the company at the time that we were in a competitive recruitment dynamic, with regards to dyskinesia. That was when the letter was sent. And so what they're looking for right now is a declaratory judgment that the sale of their product does not infringe our patents.

And we are evaluating that. Obviously, we have an obligation to enforce our IP and we take that seriously and we will -- we are reviewing the complaint.

Caroline Palomeque -- Noble Capital Markets -- Analyst

Thank you.

Operator

Thank you. And that concludes our question-and-answer session today. I would like to turn the call back over to Dr. Went for closing remarks.

Gregory Went -- Chief Executive Officer and Chairman

So, very exciting time for Adamas, as we closed out the year last year and as we entered into this year to bring GOCOVRI to patients. I thank you for your time today. We look forward to seeing you, as I said, during the quarter, at the AAN meeting, if you're attending. And to an update in May, when we have a more fulsome update for you on the first quarter of commercialization of GOCOVRI.

Thank you very much.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.

Duration: 48 minutes

Call Participants:

Gregory Went -- Chief Executive Officer and Chairman

Alfred Merriweather -- Chief Financial Officer

Richard King -- Chief Operating Officer

Rajiv Patni -- Chief Medical Officer

Joshua Schimmer -- Evercore ISI -- Managing Director

Richard King -- Chief Operating Officer

Ken Cacciatore -- Cowen and Company -- Managing Director

Roy Buchanan -- JMP Securities -- Analyst

Tim Lugo -- William Blair and Company -- Analyst

Serge Belanger -- Needham and Company -- Analyst

Carl Byrnes -- Northland Securities -- Analyst

Caroline Palomeque -- Noble Capital Markets -- Analyst

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